market reviews and narrowband internet access justin moore internet project manager, oftel 9 april...
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Market reviews and Narrowband Internet access
Justin Moore
Internet Project Manager, Oftel
9 April 2003
Overview
• Background
• Current regulations
• Market review proposals for regulation– NTS– FRIACO– wholesale Internet termination
Background
• New regulatory framework comes into effect from 25 July 2003
• Undertake market reviews to implement appropriate SMP regulatory conditions, eg– requirement to publish prices– requirement to supply specific products
Current Regulation
• BT supply of NTS and FRIACO
• BT Internet termination– publish prices– non-discrimination
Call origination
Wholesale Metered & unmetered Internet
termination
Retail metered and unmetered Internet access
FRIACO NTS
Wholesale Internet termination products(eg SurfPort, SurfPort24)
Market reviews
• Define relevant markets
• Analyse market to assess Significant Market Power (SMP)
• Consider regulatory options
Which market reviews are relevant to narrowband Internet?
• Review of wholesale call origination– consider regulation of NTS and
FRIACO
• Review of unmetered narrowband Internet termination– previous review identified competitive
issues in supply of wholesale unmetered
Wholesale call origination and local-tandem conveyance
• Fixed narrowband conveyance
• Initial view - BT has SMP
• General SMP conditions– Provision of network access, no undue
discrimination, basis of charges etc
• Supply specific products– IA, FRIACO, NTS etc
NTS call origination
• Origination of Freephone,Special local rate, Special national rate and Premium Rate Services calls
• Retail operator undertakes retailing of calls on behalf of terminating operator
NTS Options
• Option 1: No specific regulation for NTS call origination
• Option 2: Regulated retention and annually set retail uplift
• Option 3: Regulated retention and charge control on retail uplift– 3 options for charge control
NTS Initial conclusions
• Regulated retention – promotes competition and innovation
in downstream markets– significant benefits to consumers
• Retail uplift charge control (4 yrs)– avoids costs and uncertainty of
annually set charge
NTS in the Hull area
• Current unregulated arrangements appear to be satisfactory
• Introducing regulation may– introduce significant regulatory costs
and practical difficulties in billing– risk higher consumer prices
• Initial view is that regulation would not be proportionate
FRIACO Options
• Option 1: No FRIACO product
• Option 2: DLE FRIACO only
• Option 3: DLE FRIACO and unrestricted ST FRIACO
• Option 4: DLE FRIACO and ST FRIACO with ‘stranded assets’
FRIACO Initial conclusions
• Option 3: Requirement to supply DLE FRIACO and ST FRIACO– necessary to promote competition in
unmetered markets– stranded assets no longer relevant – unrestricted ST FRIACO facilitates
entry into market
FRIACO in the Hull area
• Currently no FRIACO product
• Initial view is not to impose FRIACO requirement on Kingston– Not appropriate without reasonable
demand being demonstrated
• Still need to provide network access on reasonable request
Unmetered narrowband Internet termination
• Jan 02 statement on broader market concluded – BT had market power– competition issues with unmetered
rather than metered termination
• Market review appropriate for unmetered termination
Internet termination market definition
• Unmetered v metered
• Demand side– limited evidence of switching– unmetered not justified for low users – flexibility verses security
• Supply side– cost / time to set up FRIACO network
Internet terminationmarket analysis
• Unmetered separate to metered markets– Market shares changed considerably
– Evidence of entry/competing services
– some countervailing buyer power
– BT does not appear to charge a significant price premium
Internet termination conclusions
• BT does not have SMP
• Although concentrated, initial view is that no collective dominance
• No SMP means no regulation– need appropriate call origination
regulation
– can review market again in future
Unmetered narrowband Internet termination in Hull
• Separate geographic market for Internet calls originating in Hull area
• Initial view : Kingston has SMP – only firm offering unmetered
termination and no FRIACO product
– its ISP has a large share of retail market
Unmetered narrowband Internet in Hull - Remedies
• Remedies needed to promote retail ISP competition
• Requirements on Kingston – to provide network access– not to discriminate unduly– publish a Reference Offer– publish charges, and technical
information
Summary of proposed changes
• NTS principles remain with charge control to give predictability of costs
• FRIACO remains, with ST FRIACO limitations lifted
• No regulation of metered and unmetered Internet termination